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Check Your Credit Score and Borrow More - Part 10

Heidi Armstrong explains everything about your credit file and how it affects how much your lender will lend to you when shopping for a home loan.

By understanding how your credit file is created and updated, you can make sure you keep it looking good. Heidi also explains how a lender calculates your borrowing power.

The live session is divided into 11 videos, packed with information you need before applying for a home loan in Australia.

Video transcript below:
Part 10 of 11
Check your credit score and borrow more
Heidi Armstrong, Director of Operations, State Custodians
Relocation loans, if you are buying or if selling your existing home and you are looking to upgrade.  If you go and you try to get a loan for your new property, really difficult, even let’s assume you’ve got the deposit there that you can throw in anyway.  You are having to show that you can service both loans together and often that’s double service.  But some lenders will do what’s called relocation loans and they will service you on the end debt.  So they will say, we know that you are going to be set selling that and dumping a whole lot of money off that into your new mortgage.  So we will factor in a lower amount as your end debt and service you on that amount.
Some lenders will factor in negative gearing benefits and others won’t and if you are an investor and you are doing negative gearing and perhaps if you have more than one investment property then you definitely do want to have a financer which is going to give you those benefits back because that affects your cash flow.  There will other restrictions.  
Another one is the security property.  Sometimes it’s not even about your income.  It’s about security property.  If the lender just doesn’t have a real appetite for that type of security property then they say, “well we are only going to lend you 60% of the value of that, despite the fact that you got a great income, you don’t have many liabilities, we just think based on this security property we are not going to lend you as that much.
Maintenance Income
Divorce situations, different lenders will factor it in it, if it’s been court ordered or there has been a history that’s consistent then some lenders will factor in maintenance income, others won’t.  
Parental Leave Income
Parental Leave income.  I always say if you are thinking, if you are you know first home buyers or even investors thinking about taking up an investment life and you are also juggling that you know, growing the family, check the loan first, because once you know with NCCP now you are asked in loan applications not just your situation today but you are also asked question, “do you know of anything that would, that would change your financial situation considerably that is going to happen in the next 12 months?”   
So the onus is put on you to be saying those things and if you know you are pregnant, different story if you are not yet pregnant, but if you know you are pregnant you have an obligation to say that to your lender and that’s going to affect your serviceability potentially.  Parental leave income, it’s only for 18 weeks.  It’s a big, it’s a case by case situation, but ideally lenders do want to see an income for each pay cycle that you are on leave for.
Second job, if you can’t service it, you can always go out and get a second job. No, don’t think that that the lender is going to take that income, unless you have already demonstrated for a year that you can actually hold down a second job.  So a lender is going to want to see that history.
Discretionary spends.  You might be putting in your, you know your re-finance statement and your refinance statement shows that say there is a line of credit.  So all your day to day transactions are in there.  Well a lender might say, “oh you got a gym membership, hostel membership.  Oh that’s interesting.”  Well they are ongoing, that we need to factor into serviceability calculations.  So again just be aware that the lenders now have a real strong obligation to ensure that this loan is not unsuitable.

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